Core Business Vs Diversified Business

Core Business

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The core business of an organization is an idealized construct intended to express that organization's "main" or "essential" activity The central, and usually the original, focus of an organization's activities that differentiates it from others and makes a vital contribution to its success The concept of core business became prominent in the 1980s In 1982, Tom Peters's and Robert Waterman's book In Search of Excellence suggested that organizations should stick to the knitting and avoid diversifying into

Pros and Cons of core business
Advantages  Focus is defined.  Clear identity.  Bring innovations in their respective fields. Disadvantages  risk

Examples of Core business

Maruti Udyog Ltd.
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Incorporated-February 1981 Joint Venture-October 1982 Facilities - Gurgaon: 3 vehicle assembly plants Manesar: 1 vehicle assembly plant Head Office in New Delhi, India Regional offices: 16 Employees-4993 of Financial year 2006-07 Maruti assembles different models of cars for different segments.

11 Models of Maruti

• Infosys Technologies Ltd. (NASDAQ: INFY)
was started in 1981 by seven people with US$ 250.

• Today, we are a global leader in the "next
generation" of IT and consulting with revenues of over US$ 3 billion.

• Infosys defines, designs and delivers

technology-enabled business solutions that help companies globally.

Infosys Continued…..
• Infosys also provides a complete

range of services by leveraging our domain and business expertise and strategic alliances with leading technology providers.

• Infosys takes pride in building

strategic long-term client relationships. Over 95% of our

Arcelor Mittal
The world's number one steel company, with 310,000 employees in more than 60 countries. Revenues of US$ 105.2 billion, with a crude steel production of 116 million tonnes.

Products and Services of Arcelor Mittal
Tubular services Stainless steel Wire Automotive Construction Material Distribution Steel Services Centers


Domino's Pizza India Ltd. was incorporated in March 1995 as the master franchisee for India and Nepal, of Domino's Pizza International Inc., of USA. Domino's Pizza India Ltd. has proceeded to become one of the largest and fastest growing international food chains in South Asia. First Domino's Pizza store in India opened in January 1996, at New Delhi. Presently over 165 outlets in 33 cities and is the leader in the fast food delivery segment. Customers can order their pizzas by calling a single countrywide Hunger Helpline - 1800-111-123.

Dominos continued..

Domino's vision is focused on " Exceptional people on a mission to be the best pizza delivery company in the world!". Domino's is committed to bringing fun and excitement to the lives of our customers by delivering delicious pizzas to their doorstep in 30 minutes or less. Domino's believes strongly in the strategy of 'Think local and act regional' that is subtly blended with a playful images personified by its ' Hungry Kya? ' positioning. Time and again Domino's has been innovating toppings suitable to the taste buds of the local populace and these have been very well accepted by the Indian market.

Diversified Business


Business that operates in more than one industry or market, and uses different distribution channels as a matter of corporate strategy. A company may attempt to manufacture the products itself, or it may acquire or merge with an ongoing organization.

Diversified Business
Why Diversification? The two principal objectives of diversification are  improving core process execution, and/or  enhancing a business unit's structural position Forms and Means of Diversification Diversification typically takes one of three forms:  Vertical integration - along your value chain  Horizontal diversification - moving into

History of diversification

Diversification strategies play a major role in the behaviour of large firms. A sequence of diversification followed by restructuring has been common in countries such as Australia, USA, UK and Germany In the Fortune 500 US industrial companies, the proportion that generated more than 25% of their revenues from diversified activities increased during the 1950s, 1960s and early 1970s, but then fell off again during the 1980s

Fortune 500 companies with >25% revenues from diversified activities  1950 38%  1974 63%  1988 47%

Low Levels of Diversification > 95% of revenues from a Single-business Dominant-business

Firms Vary by Degree of Diversification
single business unit Eg DLF Between 70% & 95% of revenues from a single business unit Eg UB A A B

Moderate to High Levels of Diversification Related constrained < 70% of revenues from dominant
Eg Hero Group


business; technological & distribution B links B

Related linked (mixed) < 70% of revenues from dominant
business, only limited links exist
Eg Tata Group High Levels of Diversification Unrelated-Diversified Business units not closely related

Pros and cons of diversified business
Advantages  Spreading risk  Increased opportunity  Market power (growth)  Surety about long term existence  Sharing of resources e.g. labs Disadvantages  Complexity  New business can be over valued

Examples of Diversified Business

 The

group has over 224 million sq. ft. of existing development and 748 million sq. ft. of planned projects.  The company has also entered into several strategic alliances with global industry leaders  The business traditionally has been into three prime divisions: Homes, Offices and Shopping Malls. To these DLF has added three more divisions: Hotels, Infrastructure and SEZs

Key business of DLF
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Airport Modernization Township Development Hospitality IT Infrastructure Asset Management

UB Group
United Breweries Group—popularly known Kingfisher group The UB Group (United Breweries) Group is a multi-faceted conglomerate with business interests in  Beverage Alcohol-Bagpiper, McDowels,  Pharmaceuticals-Aventis Pharma Limited ,  Media-Asian Age Holdings Ltd,  Aviation-Kingfisher Airlines Limited ,  Fertilizer-Mangalore Chemicals & Fertilizers Limited ,  Research & Development-Vittal Mallya Scientific Research Foundation

Tata Group
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98 operating companies in seven sectors Group was founded by Jamsetji Tata in the mid 19th century, The Tata Group is one of India's largest and most respected business conglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP The Tata family of companies shares a set of five core values: integrity, understanding, excellence, unity and responsibility. The Tata Group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries.

Major Companies
 TCS- software firm  TISCO- iron and steel firm  Tata telecommunications  Tata tea Inc-major brands are Tata Tea,

Tetley Tea etc  Tata Motors- Indica, Indigo, Nano  Tata Construction Equipment company

Reliance ADAGroup
Among India’s top three private sector business  Across different companies, the group has a customer base of over 100 million, the largest in India  a shareholder base of over 12 million, among the largest in the world.  Through its products and services, the Reliance - ADA Group touches the life of 1 in 10 Indians every single day.

RelianceADAG companies
Reliance Capital-interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking  Reliance Communications Limited  Reliance Energy Limited-generation of electricity  Reliance Health  Reliance Media & Entertainment-ADLABS, BigFM, Mobile TV, DTH

Comparison w.r.t. businesses
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US economy is heading towards core business Indian economy is heading towards diversified business

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Collectivism in Indian economy Opportunities in India are more US Economy is stagnant and India is developing economy More and more companies want to come to India Competition

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